Sales funnel vs Sales Pipeline: Decoding the Difference

You probably use the terms sales funnel and sales pipeline interchangeably. Did you know that they are actually different concepts?

Oftentimes, even seasoned sales professionals get confused about sales funnel vs sales pipeline. 

Both have a significant impact on your company’s bottom line. By implementing even one of these concepts correctly, you can increase conversions.

Before you can convert more leads into paying customers, you need to have a thorough understanding of sales funnels and sales pipelines. 

Let’s dive deeper into each concept and look at the differences between the two.

A sales pipeline consists of a series of steps taken by your leads as they move from being a prospect to buying from your company. 

Sales reps and sales teams track sales pipelines as they depict the sales process of the company.

Sales pipeline stages tend to be well-defined. Sales executives need to take certain actions in each stage to nudge the lead to the next stage and further along the pipeline. 

A sales pipeline is usually used for business-to-business (B2B) transactions. This is because they work very well for high-value products or enterprise solutions.

Generally, marketing teams and leads have many touch-points as leads progress through a sales pipeline. Companies should customize sales pipelines to match their needs. 

Here are the 5 stages usually found in most sales pipelines.

This step involves finding prospects and guiding them to the sales pipeline. Sales reps use strategies like email marketing, telemarketing, and search advertising to spread the word about their company and its products.

At this point in the pipeline, the lead knows very little about your company.
But they may show interest in learning more.

Sales reps start getting more involved from this stage onwards in the pipeline. Based on whether they are a good fit or not, the leads gathered through lead generation efforts get filtered here. 

Sales reps retain the leads who will benefit from the company's solutions.

During lead qualification, sales executives reach out to leads over the phone, in person, or online. 

They gather requirements and problems from prospects and decide if the company’s solutions can help solve their problems. Moreover, they check if the potential customer can afford these solutions.

Also, you would have your ideal customer in mind and it is best to have buyer personas created for your company and its products. 

You can use data about how your potential customers engage with lead generation efforts such as clicks and email activity to refine your buyer personas.

Comparing potential customers to buyer personas will help you identify the best-qualified leads for your company. You need to take your time at this stage as sending unqualified leads down the pipeline will negatively impact conversion rates.

At this stage in the pipeline, sales teams meet with the qualified leads to discuss the products in detail. 

These meetings often also involve product demos and presentations so that both parties can figure out if the product is the right fit for the prospective buyer.

After successful sales meetings, when the customer expresses a desire to buy the product, sales reps move on to preparing proposals. The proposal usually includes terms of agreement, contract length, scope of work, and cost of the product/service.

You know you’ve reached the end of a sales pipeline when you close the deal with a prospective customer. They have accepted your sales proposal and have signed a contract.

There can be a few more rounds of negotiations to smooth out finer details before the prospective customer becomes a paying customer. This stage could also involve you losing the lead if the customer does not like your sales proposal.

To get back the sales opportunity, your sales reps can reach out to the lost lead at a later point in time and re-negotiate the proposal. If the deal has been closed successfully, you can add another step to your sales pipeline - Retention.

Efforts need to be made to arouse customer loyalty to bring in repeated business from the same customers. Client servicing and support teams usually take over during the retention stage.

When it comes to the sales funnel vs sales pipeline debate, the sales funnel can be thought of as a customer’s viewpoint of the sales process. A sales funnel represents the various stages of a buyer’s journey as they transform from a curious lead to a paying customer.

A sales pipeline focuses on the actions required by sales personnel to push the lead through the pipeline. 

Whereas for a company its sales funnels show the number of prospects and conversion rates at different stages of the sales process. We call it a “funnel" as the number of leads decreases with each stage. 

As we move down a sales funnel, each stage can be looked at as an increased level of interest that the customer has in your company and its offerings. 

Customers drop out of the funnel as their intent to buy decreases as they learn more about whether the company’s solutions match their requirements. 

There are 4 common stages in most sales funnels but your business can add more steps to better suit your business needs. From the names of the stages, you can see that they describe the feeling or level of awareness that a lead has towards a brand.

The top of the funnel is the stage at which a prospect comes to know of the brand. They would have come across the company’s marketing content through Google searches, online reviews, word of mouth, or social media.

The volume of leads is the maximum at this stage and it reduces as we move further down the funnel. Hence giving the visual representation of the sales funnel the look of an inverted pyramid or a funnel.

Although the number of leads drops at this stage, the leads are also of better quality than in the previous stage. You have a better chance of conversion during the discovery stage.

Here, the prospect wants to know more about your business and its solutions and services. They conduct research with intent and engage more with your company’s content such as websites, social media posts, and landing pages.

Let’s take a look at Help Scout’s landing page. It is engaging with minimal, yet impactful content and even has a video to allow prospects to learn more about the product. The eye-catching CTAs also help nudge leads to the next stage.

Once the prospect has done enough research, they start comparing the different products that they’ve gathered information on. The prospect is said to be in the evaluation or consideration stage.

Leads may use information such as costs, pricing tiers, membership levels, etc. to verify if a solution is within their budget. 

They could also look at case studies and testimonials to gauge how well the solution has worked for others. It goes without saying that you should make such information accessible to prospects so that they can make informed choices.

Now, the customer is ready to reveal their intentions regarding your services or solutions. They can decide to buy the product or request a sales proposal from the company.

Conversely, a prospect could choose another company’s product based on all the research they’ve done during the evaluation phase.

Once a positive decision is made, the prospect becomes a paying customer by taking the necessary steps to buy your product or signing a contract. Sometimes, another stage is added to the sales funnel to capture this part of the sales process.

Sales pipelines and funnels track the journey of converting a lead to a paying customer. However, a pipeline represents a business’ or a sales team’s activities. These activities include finding leads, qualifying them and closing the deal. 

A sales funnel tracks the sales process from the lead’s point of view. This starts from finding out about a company to evaluating it, right up till deciding to buy or not. Sales funnel reports allow companies to track conversion rates at each stage.

Sales funnel reports can be used to track the best-performing channels for bringing in leads to the funnel. 

Through these reports and visualizations, sales teams can also figure out where conversion rates are low so that they can tweak their sales strategies. 

For example, if a large number of leads are dropping off at the evaluation stage, sales and marketing efforts can be focused on releasing more content about products to the leads. Analyzing customer behavior at this stage may also reveal how your product fares in comparison with those from other brands. 

Maybe your pricing tiers are more expensive than the rest. To increase the conversion rate at this stage, you may have to rethink your pricing strategies.

Usually, it takes much longer to drive a lead through a sales pipeline. One of the reasons why is that sales pipelines are usually meant for big-ticket and enterprise-level solutions and products.

Sales reps need to have multiple calls, meetings, representations and demos to convince leads to buy their high-value products. Sales reps also have to spend time qualifying leads, creating proposals and negotiating contracts. In essence, a lot of time is required to customize sales pipelines for each lead. 

Sales funnels don’t require much direct involvement from sales reps and, thereby, are shorter. Sales funnels are influenced more by the actions and decisions of the buyer and are best used for lower-priced products.

Take the example of a sale on an eCommerce website. A customer finds the product, looks at its price, checks out reviews from other customers and then completes the sales funnel by buying the product. All this can take only a few minutes.

Let’s use the example of a sales pipeline for CRM software. Once a sales rep receives a lead, they would go on a call to discuss the product in greater detail. 

If the lead is interested, the sales rep would then provide on-site demos of their CRM software to show how it could solve a customer’s issues. 

These demos can take place over many meetings and hence add more time to the pipeline. The sales rep would then have more meetings to finalize contracts before the customer makes a payment. 

Oftentimes, entire teams are dedicated to sales pipelines and there could be multiple meetings, emails, calls and negotiations to move the leads through pipelines. This means that it can take days or even months to close a sales pipeline.

There are software solutions out there that automate pipeline sections by providing robust monitoring and tracking features. However, sales pipelines are harder to automate. 

You need human involvement to communicate and convince leads.
Sales funnels are much easier to automate. As long as the prospect has all the information they need and the funnel is easy to navigate, they will take the necessary steps from their end.

There are many sales funnel builders available that you can plug into your company’s existing infrastructure to set up sales funnels that need minimal intervention. 

For example, an automated sales funnel for a website can collect email addresses from landing pages and send emails from email marketing campaigns. It can even upsell and downsell to customers at the end of the funnel.

Even after reading through all this information about sales funnel vs sales pipeline, you may still not be sure exactly which one is right for your business. Here are a few things to consider that will make your decision easier.

Companies in the B2B industry that have highly specialized products and services would be wise to choose a sales pipeline. Such products often serve niche industries and solve very specific problems. 

This makes the sales process more complex and requires intervention from sales personnel.

Companies in the B2C (Business-to-consumer) industry benefit more from a sales funnel. They can focus their marketing efforts on improving conversion rates rather than guiding individual prospects.

If your company has a complex sales process and you need to know how many deals are in which stage, go for a sales pipeline. Sales pipeline reports will show you where deals are blocked and how long it takes for deals to move through the various stages.
With this information, you can not only figure out which deals and stages need more attention at the moment but can also streamline your company’s entire sales process for the future. 

Pipeline reports are also valuable to senior management as they can help them forecast sales and estimate revenue, thereby allowing them to decide if the company needs more staff or not.

Of course, many companies choose to set up both sales funnels and pipelines. If you choose to install both, make sure that they’re aligned with each other. 

Often, you’ll have the same marketing and sales strategies for both. If they’re completely independent of each other, you’d be wasting time and effort in correcting duplicate or opposing strategies

Having both allows you to provide the ideal experience to customers and have a streamlined and efficient sales process.

Sales funnels are more customer-oriented while sales pipelines are more business-oriented. Nonetheless, both provide powerful insights that can boost your bottom line when actioned upon properly.

Apart from tracking deals, with sales pipelines, you can check the performance of sales teams and sales reps. You can predict the sales volume for the coming months and quarters and hire more sales executives if needed.

Sales funnels will let you know where your marketing strategies are doing well and where they need to be revamped. 

If the volume of incoming leads is low, you can choose to focus campaigns on improving brand awareness. If, say, the conversion rate plummets at the discovery stage, you may want to boost your social media campaigns and publish more SEO-rich content on your website.

Regardless of which one you choose, you will have to constantly test and change funnels and pipelines. This is essential to attract more qualified leads and surpass sales goals.